Continuing Stock Market Jitters

February 9, 2018

Equities lost 4.1% in China, 3.6% in Hong Kong, 2.3% in Japan, 1.8% in South Korea. They are down 0.9% in France and 0.7% in the U.K. and Germany. After yesterday’s second 1000+ point daily drop of this week, the DOW initially rose today but now shows a decline of nearly 200 points. It’s taken just two week for U.S. share values to fall 10%, the technical threshold for a “correction.” If such a pace is sustained, the bear market threshold of 20% would be crossed in just a month. Bear markets on average have a duration of a year and a half. So either the knife stops falling soon, or this retreat could be one for the ages. The pundits are voicing calm and patience. Whatever the outcome, corrections and bear markets in the nascent stage are downplayed. On the plus side, recent U.S. and global economic data have been good. On the minus side, America is stepping away from its role as leader of the free world, turning protectionist, reversing financial market regulations that were imposed to avoid a repeat of the Great Recession, and embarking on a new fiscal policy that will create even greater income and wealth disparity while driving up fiscal debt. Finally, There’s a risk of a Federal government shutdown, and the Fed Board of Governors’ membership is undergoing a vast turnover.

The dollar today is mixed, with rises of 0.9% against sterling, 0.4% versus the Swiss franc, 0.2% vis-a-vis the loonie and 0.1% against the yen but losses of 0.4% against the Aussie and New Zealand dollars, 0.3% versus the yuan and 0.6% against the peso.

West Texas Intermediate crude oil is down 1.5%, and Comex gold has slid 0.4%.

The ten-year Treasury yield rose three basis points, while yields on 10-year sovereign British, German and Japanese debt have slipped.

Japan’s tertiary index of service sector activity dipped 0.2% in December, flattening the 12-month rate of increase to just 1.1% inĀ  both December and the fourth quarter. The index rose 0.8% for 2017 as a whole, similar to increases of 0.7% in 2016 and 0.9% in 2015. Japanese M2 money grew 3.4% on year in January, down from 3.9% in the final quarter of 2017 and 4.0% in full 2017.

Chinese consumer prices posted a 0.6% monthly increase in January, but on-year CPI inflation slowed to a 6-month low of 1.5%. PPI inflation slowed, too, to 4.3% from 4.9% the month before.

Canadian labor statistics started 2018 on a bad footing. The jobless rate backed up to 5.9% from 5.8%. A 137K decline in part-time workers caused the total level of employment to fall 88K after having risen 64.8K in December.

Mexico’s overnight interbank funding rate was raised by the Bank of Mexico to 7.5% from 7.25%. Peru’s central bank left its policy interest rate unchanged at 3.0%.

Several British economic indicators were reported. Industrial production fell 0.2% monthly in December, leaving such unchanged from the year earlier level. Construction output, on the other hand, climbed 1.6% on month but dipped 0.2 on year. Finally, the U.K. trade deficit remained huge. The overall goods and services imbalance swelled to GBP 4.9 billion in December from GBP 3.6 billion in November, and the merchandise trade deficit climbed from GBP 12.5 billion in November to GBP 13.6 billion in the year’s final month.

Greek industrial production posted the smallest on-year rise (just 0.2%) in December since September 2016.

Norwegian CPI inflation stayed at 1.6% in January, while PPI inflation accelerated to 10.3%. On-year Norwegian GDP growth slowed to 1.4% last quarter from 3.4% in the third quarter of 2017.

However, Italian and French industrial production posted monthly advances in December of 1.6% and 0.5%, lifting their respective on-year increases to 4.9% and 4.5%.

Swiss seasonally adjusted unemployment stayed at 3.0% in January.

In December, Brazilian retail sales fell 1.5% on month, while Mexican industrial production rose 0.9%.

Mortgage loans in Australia sank 2.3% in December, reversing November’s monthly increase.

Copyright 2018, Larry Greenberg. All rights reserved. No secondary distribution without expressed permission.


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